HEALTH WEALTH CAREER ROTATOR ASSIGNMENTS: TRENDS, CHALLENGES, AND OPPORTUNITIES FOR ENERGY, ENGINEERING & CONSTRUCTION, AND MINING
Changing demographics, security issues, government restrictions, talent shortages, and compliance issues are just some of the challenges facing global businesses with international rotator assignees. International rotators are employees who alternate periods of work in an offshore or onshore location with periods of leave typically in their home location according to a fixed rotation schedule. Rotators are often based in remote locations and work extended workdays/weeks, typically unaccompanied, differentiating their situation from that of typical expatriates. For global mobility managers, managing rotator assignments presents a series of separate and often unique issues. Rotator assignments are heavily used in certain industries, such as energy, oilfield services, mining, and the engineering and construction sector. Competition for qualified resources in these industries can be extremely fierce, particularly when companies are bidding on new projects. Given that many of the work locations can be remote and sometimes hazardous, companies typically find that it is easier and less expensive to use rotators rather than traditional expatriates. These types of arrangements are also used for practical reasons many of the areas rotators work in have little or no entertainment or recreation opportunities, making them less attractive to expatriates. From surveys and benchmarking projects that Mercer has conducted, it is clear that employers are continually reviewing their programs and benchmarking policies and practices for these types of assignments. Frequent changes in the nature and location of projects, as well as the resources being utilized, make it critical for companies to fine tune their policies to keep up with competitive practice. 2
KEY ISSUES Companies have to address several critical policy issues when dealing with rotators: Establishing consistent schedules can be challenging in terms of balancing business needs with local labor laws. However, while schedules do vary for rotators, most follow a 28-days-on/28-daysoff schedule, with the workweek typically consisting of 12 hours a day, 7 days a week. Determining the appropriate compensation structure to use can become problematic when multiple nationalities of rotators are employed. Most companies try to retain rotators in their home country salary structures, but this can create problems when rotators of different nationalities are receiving significantly different compensation treatment. Deciding on the level of premiums and allowances, such as foreign service premiums, hardship allowances, and per diems for rotators in different locations, is particularly challenging. Although many companies tend to use premiums and allowances that are similar to what they provide to traditional expatriates, this is not always the case. Some companies argue, for example, that rotators are not subject to the same level of hardship in difficult locations as residential expatriates who are there with their families year round. Ad hoc incentives and allowances are frequently established in order to make successful bids for specific projects. And the key incentive for most rotator assignments is compensation, whereas other expatriate assignments are often desired for career progression purposes. ROTATOR POLICIES: ALWAYS IN FLUX Employers of rotators continually must review and address several benefits and policies on a regular basis: Vacation entitlements. Time off for business meetings. Overtime. Health insurance (almost always provided, though costsharing policies vary). Life insurance. Disability insurance. Pension plans (far less common, though a growing issue). For Canadian mining, energy, and energy related companies, the phase-out of the Overseas Employment Tax Credit, which has reduced the Canadian tax liability of many Canadian rotators, is presenting major problems. The tax concessions will be totally eliminated at the end of 2015 and the companies affected are all in the process of trying to decide whether they can afford to compensate their rotators in some way. This is a major dilemma, as most of these companies are trying to balance the need to retain key employees with the need to reduce costs. 3
Employee tax liability is another critical policy challenge for companies employing rotators. Company policies vary considerably. Some companies tax-equalize rotators back to their home countries, while others pay any host country tax liability for the rotators but have the employees pay any home country taxes. Tax policies, however, are often still evolving and can vary from project to project. These are just a sampling of the policy issues for rotators that companies are dealing with. CHALLENGES AND SOLUTIONS Ongoing market volatility is placing huge economic pressure on energy and mining companies, as well as the engineering and construction companies and service companies that support their industries. The economic environment for these industries has changed dramatically in the past couple of years. Dramatic falls in global demands for gas and mineral products have resulted in major reductions in gas and mineral prices. The world that these companies are accustomed to operating in has changed significantly because of financial pressures, and companies in these industries are looking for innovative ways to increase productivity, reduce costs, and still remain competitive. Unlike other sectors, many organizations in these industries tend to live from project to project. Overbidding on a major project can result in losing a major lucrative business opportunity, while underbidding can lead to a loss-making situation that can damage an organization s financial status for many years. Employee costs are another major factor in many projects. Finetuning rotator and expatriate costs can be a key element in the success or failure of an initial project bid and, if successful, the ongoing financial success of the project. Finally, legal, tax, immigration, and regulatory compliance issues are additional ongoing challenges for organizations employing rotators. Laissez faire tax policies are no longer appropriate and can leave employees and employers at risk. To address some of these concerns, many organizations are developing separate global policies for rotator 4
assignments, including specific tax policies. A growing emphasis is also being placed on governance and compliance, especially in the areas of tracking, payroll, per diems, and taxes. With increased government scrutiny even in less-developed countries, having a foreign government shut down a major project because of tax evasion is no longer a theoretical risk. SUMMARY Rotators are globally in demand, the policies surrounding them are complex, and those companies utilizing their services are highly conscious that rotator employees are critical resources essential to corporate business strategy. Given the vital nature of rotation assignments to the business success of many organizations, Mercer will be conducting a comprehensive international rotator policies and practices survey in June 2015 without cost to participants. We hope that many clients will share information about their rotator policies and programs as part of this survey. For more information, visit imercer.com/rotators. ABOUT THE AUTHOR Roger Herod, SPHR, is a principal with Mercer. Based in Chicago, he carries out a wide range of global projects for major multinational clients in the United States and Europe, with a particular focus on global compensation, benefits, and mobility issues. He can be reached at roger.herod@mercer.com. 5
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